National Insurance Contribution Rates for Employers 2025 (with Calculator)

In October 2024, the Labour government announced an increase in National Insurance contributions (NICs) for employers as part of its Autumn budget.

From April 2025, Class 1 contribution rates will increase from 13.8% to 15.0%. The government will also lower the secondary threshold (ST), meaning businesses must start paying NICs from £5,000 of an employee’s earnings instead of £9,000. This change could bring significant consequences for how to pay employees in a small business.

Our guide breaks down the percentage rate changes in real terms; outlining how it will affect income for self-employed and business owners.

Employer National Insurance Contribution Calculator - what's changing from April 2025?

National Insurance rates for employers

Employers must pay NICs for all staff salaries above the secondary threshold, which is the minimum amount an employee must be paid before employer contributions are triggered.

For the 2025 financial year, the threshold will be around £96.15 a week. This means that, as an employer, you are responsible for paying NICs on any amount an employee earns past £5,000 a year.

However, these changes do not impact other employer NIC thresholds, such as those for apprentices or workers aged under 21. Apprentices will still be cheaper to employ, and businesses will only have to pay the new 15% rate if these groups earn over £4,189 per month.

Chancellor Rachel Reeves announced the increase in NICs for employers to “help fund public services” and “restore economic stability”. However, concerns have been raised about how the NI increase will affect employers, particularly when it comes to facing high overheads, rising staffing costs and the risk of stunting growth for SMEs.

George Hughes-Davies, founder of Daily Dose, commented: “The hike in NI accounts for the cost of hiring over three additional staff at Daily Dose. While it will increase tax revenue, it will stifle growth across the board in small and medium-sized businesses, growth that would have increased tax revenue and reduced unemployment, helping to reduce government expenditure.”

Hospitality businesses in the UK have also expressed their concerns about the NIC increases and secondary threshold.

In an open letter, businesses described the changes to the NIC threshold as “regressive” and that it would impact negatively on lower earners and flexible working practices, as well as lead to job losses.

“Without action, many businesses will be forced to reconsider their growth plans, and many smaller venues may be at risk of closure, risking future job creation in communities up and down the country.” the letter reads.

What are the National Insurance rates for employees?

National insurance is a tax paid on an employee’s earnings. It is used to fund future benefits, such as state pensions, as well as the NHS.

Employers contribute a portion of NICs to the government, and the employee pays another chunk through deductions from their salary.

The total payment is usually automatically calculated using payroll software. But to establish the amount each party owes, National Insurance has four classifications: Class 1, 2, 3 and 4.

• Class 1: This is paid by both the employer and employee, and is automatically deducted from an employee’s gross pay based on how much they earn. An employee’s contribution to a Class 1 NIC is the “primary contribution”, while the employer is the “secondary contribution”.
• Class 2: These are contributions made by self-employed people who earn over £6,725 in profits yearly. Contributions are paid at a fixed weekly amount of £3.15 through a self-assessment tax return.
• Class 3: This refers to voluntary contributions from individuals who want to fill in any gaps in the NI records, such as from unemployment, relocation outside of the UK or low-paying employment. The maximum Class 3 NIC contribution is £15.85 per week,
• Class 4: Similar to Class 2 NICs, self-employed individuals may also need to pay Class 4 contributions. However, this only applies if their profits are £12,570 or more a year. As of the latest Autumn budget, Class 4 NICs are charged at a rate of 6% on profits between the lower annual profits limit (£12,570) and upper profits limit (£50,270).

The government has not announced any changes to employee NICs for FY 2025/2026.

How will the new national insurance rates affect take-home pay?

As there haven’t been any reported changes to employee take-home pay, staff can expect NICs to remain the same for the next financial year. However, it’s also important to note that income tax rates will remain frozen until the 2027/28 financial year.

Wages in the UK increased by 4.8% in the three months to September 2024. While this might look like a positive at first glance, frozen income tax bands can result in employees earning less, not more.

Example: If someone earning £35,000 had a pay rise in line with inflation, they would earn £38,150. This would move them into a higher income tax band and add £52 to their monthly tax bill.

Will national insurance rates change again?

It’s been a wild ride for National Insurance rates so far. In 2022, rates were raised by 1.25%to give the government more money to pay for social care and an overstretched NHS.

As households became squeezed by inflation and rising bills last year, however, National Insurance rates were cut as part of Liz Truss’ brief tenure as Prime Minister.

Last November, Jeremy Hunt slashed the rates again as part of a package of tax cuts in his 2023 Autumn Budget. He then cut them again in March 2024’s Spring Budget.

Ostensibly, this is to help people weather the cost of living crisis. Rishi Sunak even hinted at losing national insurance altogether, claiming it is unfair to tax individuals ‘twice’ with both NI and income tax levies.

Now with the Labour government in power, NICs aren’t expected to change for employees until April 2028, as part of Prime Minister Keir Starmer’s “working people” pledge. However, the news of NIC increases for employers hasn’t landed well with businesses. With rising concerns over growth and staffing costs, many remain apprehensive about the next coming year.